“Inadequate oversight” by the Minnesota Department of Education created an opportunity for a massive fraud scheme that allegedly stole more than $250 million federal dollars meant for pandemic children’s meal programs, according to a state audit report published Thursday.
A report from the Office of the Legislative Auditor found the education department failed to act on warning signs of fraud at the nonprofit Feeding Our Future and didn’t exercise its authority to hold the nonprofit accountable. The office said it found numerous instances when MDE failed to properly monitor federal dollars, “especially given information it either had in its possession or should have obtained but did not.”
“MDE’s responsibilities under federal law ranged from providing guidance and training to Feeding Our Future staff, to terminating the organization’s participation in the programs if warranted,” said Legislative Auditor Judy Randall and Special Reviews Director Katherine Theisen in a letter attached to the report. “We believe MDE’s actions and inactions created opportunities for fraud.”
The OLA identified three main issues with the Education Department’s oversight of federal funds.
— Failure to act on warning signs known to the department prior to the onset of the COVID-19 pandemic and prior to the start of the alleged fraud.
— The department didn’t effectively exercise its authority to hold Feeding Our Future accountable to program requirements.
— MDE was ill-prepared to respond to the issues it encountered with Feeding Our Future
Seventy people have been indicted so far in connection with a quarter billion in stolen federal dollars meant to help feed needy Minnesota children during the worst of the COVID-19 pandemic. Federal authorities say much of the fraud centered around the nonprofit Feeding Our Future, which received federal dollars via the Minnesota Department of Education.
Alleged fraudsters spent money on homes, trips, jewelry and luxury cars, according to prosecutors.
Pandemic funds
The money was supposed to reimburse nonprofits for meals served at locations like day care centers, after school programs and summer camps. Federal prosecutors have said individuals involved with Feeding Our Future and another nonprofit, Partners in Nutrition, claimed to serve thousands of meals at locations that turned out to be deserted.
There was widespread fraud during the pandemic as the U.S. government provided billions in aid intended to soften the blow of economic disruptions linked to COVID-19. The case of fraud at Feeding Our Future is among the most significant cases, federal authorities have said.
Last week jurors found five of seven defendants on trial in connection to the scheme guilty of fraud. Authorities say the seven were responsible for a total of $40 million in fraud.
MDE admits some fault
The Minnesota Department of Education said the audit pointed out weaknesses in its approach to disbursing federal funds, but disputes the Legislative Auditor report findings that it had “inadequate oversight” and says it made referrals to law enforcement that resulted in criminal prosecutions.
“What happened with Feeding Our Future was a travesty — a coordinated, brazen abuse of nutrition programs that exist to ensure access to healthy meals for low-income children,” Education Commissioner Willie Jett said in a letter responding to the audit “The responsibility for this flagrant fraud lies with the indicted and convicted fraudsters.”
The Feeding Our Future fraud allegations had already come to light before Jett became commissioner in January 2023. The fraud transpired during the tenure of former commissioners Heather Mueller in 2021-2023 and Mary Cathryn Ricker in 2018-2021.
MDE blames lack of clear guidance from the U.S. Department of Agriculture, lack of rule-making authority under state law, which would give them more power to turn down partnerships, and pandemic-era waivers allowing for “offsite reviews and alternative forms of oversight.”
The department had been aware of complaints and suspicious activity at the organization since at least summer 2020 and had notified the USDA of issues in November or December of that year. Complaints had already started in 2019, and MDE had previously declined Feeding Our Future’s application to become a partner when it asked for meal dollars before the pandemic. In all, about 30 complaints came in by 2021.
The Education Department wasn’t properly equipped to handle fraud investigations, so it was difficult to verify information submitted by large nonprofits MDE general counsel Maren Hulden told the Legislative Audit Commission on Thursday.
“We didn’t have investigatory tools. And so when our regulated entities provide us with documentation like that, with that level of detail, we don’t have tools to dig underneath as to whether or not it’s been falsified, and that’s why we reached out to law enforcement,” she said.
Lawmakers press on commissioner
The Legislative Auditor’s office and state education leaders briefed lawmakers on the report at an audit commission meeting Thursday.
Rep. Duane Quam, R-Byron, asked Jett if anyone responsible for disbursing money to Feeding Our Future had been disciplined for oversight failures.
Jett, who appeared at the commission with the Hulden, did not directly answer what had happened to any of the 15 employees responsible for distributing the federal meal dollars and instead told lawmakers he wouldn’t point fingers at anyone in his agency.
“First and foremost that’s not who I am as a person, it’s not who I am as the Commissioner of Education,” Jett said, “There are some things and some findings in the OLA report that are fair, and we’re using this report as a tool to improve. But to say that we need to come here and place blame or highlight who missteped. That’s not right.”
Republicans were skeptical of Jett’s response.
“The job of running an organization is actually making sure that you have competent people doing it,” Quam responded.”And one way to drive that is to actually discipline people.”
Sen. Ann Rest, DFL-New Hope, had similar concerns about responsibility getting passed along, and noted the previous commissioners had the ability to stop fraud.
“We don’t hear about programs to feed students in other states that experienced such fraud,” she said. “The buck is still running down the street, running down the street and stopping nowhere. And that is unacceptable.”
What’s changed? What’s next?
After the alleged fraud came to light, the state education department took a few new steps to protect against future abuses. It established an office of inspector general, added a general counsel’s office, started providing training to staff on an updated fraud reporting policy and contracted with a firm to conduct financial reviews of certain partners.
The Legislative Auditor on Thursday made a few recommendations for changes at MDE to prevent future fraud cases.
— Revision of complaint investigation procedures, including an emphasis on independent fact-finding
— Information from nonprofits considered “high risk” should undergo more verification
— Follow up reviews to make sure corrective action plans actually happen at nonprofit partners found to have problems
— Expansion of MDE’s rulemaking powers
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